SEC v. Subaye, Inc. and James T. Crane, Case No. 13-civ-3114 (S.D.N.Y). On May 8, 2013, the SEC announced it filed fraud charges against China-based Subaye, Inc. and its former CFO, James T. Crane. According to the SEC, Subaye purported to be a provider of cloud computing services to Chinese businesses. The SEC alleges that the company claimed to have well over 1,000 sales and marketing employees in 2010. The company also claimed to have revenues of $39 million for its 2010 fiscal year and was projecting revenues of more than $71 million for fiscal 2011. In reality, Subaye did not have any revenues, few or no real customers, and did not have the capacity to support a cloud computing business.
The SEC alleges that Crane signed Subaye’s misleading filings with the SEC that contained false statements about the company’s revenues, business, number of employees, and number of paying customers. Crane also falsified Subaye’s books and records and gave false information to the company’s outside auditors. Crane also violated a bar from the Public Company Accounting Oversight Board (“PCAOB”). Crane was previously sanctioned by the PCAOB and barred from being associated with a registered accounting firm or being associated with any public company in an accounting or financial management capacity. The SEC charged Crane with violating Section 10(b) of the Exchange Act and Exchange Act Rules 10b-5, 13a-14, 13b2-1 and 13b2-2, and Section 105(c)(7)(B) of the Sarbanes-Oxley Act of 2002. The SEC also charged Crane with aiding and abetting Subaye’s violations of Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Exchange Act Rules 10b-5, 12b-20, 13a-1, and 13a-11. The SEC seeks injunctive relief, disgorgement, and civil monetary penalties. It also seeks an order prohibiting Crane from serving as an officer or director of a public company. The SEC charged that Subaye violated Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act of 1934 and Exchange Act Rules 10b-5, 12b-20, 13a-1 and 13a-11. Subaye settled with the SEC. Without admitting or denying the allegations, the company consented to an injunction against future violations of the federal securities laws.